Calumet, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Financial and Strategic Strength: Calumet generated $92.5 million of adjusted EBITDA with tax attributes. Cost and reliability initiatives outperformed expectations.
• Montana Renewables: On track for MaxSAF expansion in the first half of 2026, with the SAF marketing plan pacing well. Monetized PTCs and completed a successful SAF test run.
• Specialties Business: Specialty Products & Solutions had a record production quarter with strong margins. Performance Brands segment benefited from the commercial excellence program.
• Cost and Reliability: Removed $24 million of operating costs in the third quarter compared to the same quarter last year, with year-to-date operating costs $60 million lower. Year-to-date production was up nearly 600,000 barrels.

Segment Performance

• Specialty Products & Solutions: Generated $80.2 million of adjusted EBITDA in the third quarter. It was the fourth consecutive quarter with sales volume exceeding 20,000 barrels per day. Year-to-date, transportation costs decreased by $15.3 million.
• Performance Brands: Posted a strong quarter despite selling the Royal Purple Industrial business earlier. TRUFUEL brand had strong volumes and margins.
• Montana/Renewables: Adjusted EBITDA with tax attributes was $17.1 million in the third quarter. Monetized $25 million of PTCs in the quarter, and the SAF test run was successful. The asphalt business had a $14 million year-over-year gain in the third quarter.

Guidance

• Montana Renewables: Anticipates a strong recovery in 2026 with a finalized RVO expected to lift industry margins. MaxSAF expansion is on track for a H1 2026 launch.
• Debt Reduction: Deleveraging remains a priority, with strong business performance expected to support debt reduction in Q4 2025.
• PTC Monetization: Expect to continue ratable monetization of PTCs, trending towards a ~95% capture.

Risks

• Industry Volatility: Renewable diesel margins were weak in the third quarter due to feedstock physical basis widening. Industry utilization was at ~60% with potential facility shutdowns.
• Regulatory Uncertainty: Uncertainty around RVO and small refinery exemptions could impact margins and operations.
• Feedstock Price Volatility: Temporary feedstock tightness in the third quarter, which could impact margins if not transitory.

Question and Answer

Q: On MaxSAF expansion, what are the gating items?

A: Very little, with tactical constraint removal during turnaround and catalyst performance in the new configuration being the main considerations.

Q: Impact of small refinery exemptions on financials and RIN balances?

A: Reduced the outstanding RIN obligation by ~$320 million, confident small refineries will qualify, awaiting EPA processing of public comments.

Q: Feedstock impact on 3Q MRL results and future?

A: The feedstock tightness was transitory, with expect volatility to balance out over time.

Q: Deleveraging and maturities?

A: Cash flow from the business, RPI sale, and potential strategic activity will address maturities, focusing on organic cash flows and monetization of Montana Renewables.

Q: PTC monetization realizations?

A: Expect to monetize closer to 95%, initial monetizations were closer to 90%, with activity ratable going forward.